Immediate impact on the world market of the surprise ban on beef exports to Argentina
Global beef trade is still absorbing the significance of Argentina’s surprise 30-day export suspension announced yesterday, but repercussions are already being felt in trade around the world. Click here for yesterday’s initial report on Beef Central.
There was an immediate response in some markets, with yesterday’s Urner Barry Yellow Sheet (a key daily monitor of U.S. meat price movements and influences) reporting that across the US import beef complex United, the prices charged to beef exporters were significantly higher than those from beef exporters. from the previous day, and trading values were “significantly higher”.
90 CL imported Australian / New Zealand beef was listed yesterday at US $ 274 / cwt – arguably its highest point since the sharp price hike in November 2019.
The repercussions of Argentina’s suspension are already rippling through other markets such as Singapore, which had previously supplied (mainly air freight) with chilled beef from Argentina.
An Australian trader reported ‘large orders’ from Singapore for Australian beef in the past 24 hours, as a direct result of the Argentinian suspension.
“Argentina had grown into refrigerated air freight in high-end markets like Singapore, which was really a challenge for our high-end grass feed program – but there are certainly challenges there. down today, ”said one exporter. “Traditionally, we have seen a decline in loin cuts in Singapore at this time of year, but yesterday’s announcement seems to reverse the trend.”
“The market for imported beef into the United States was already on the rise in the past two weeks, but everything about Urner Barry yesterday had ‘green numbers’ (indicating price hikes across the board for a range of popular declines from price hikes) against him – in North America, South America and Central America, ”a leading trader said this morning.
He said the Chinese had recently tried to keep beef prices in the country, but reports late last week showed most commodities had risen again and Argentina’s development. ” would only add energy to that. “
In his daily commentary, Urner Barry said this morning that yesterday’s Argentina news saw trade working to determine how development might change the flow of (imported) goods to the United States.
He pointed out that Argentina was second behind Brazil in sourcing imported beef to China, with first quarter exports to China totaling more than 109,000 tonnes. China accounted for about 70% of all of Argentina’s beef exports last year.
“When we spoke with large end-users in the United States about the impact that Argentina’s ban could have on the delivery of their products imported from Argentina, the bigger issue seemed to be how the suspension could have an impact on trade flows for the largest suppliers of imported beef from the United States, including New Zealand, ”said this morning’s report.
Asked whether markets may have anticipated Argentina’s move, given the “ chatter ” that had circulated about the prospect of an export pullback at the end of last week, a Veteran Australian meat trader said it was hard to tell.
“But it is certain that China is now hunting beef around the world,” he told Beef Central.
Other exporters said the meat export markets they served had not yet adjusted significantly, but admitted that there was “a lot of speculation going on, both from the Canadian side. purchases and sales ”.
“It will definitely help business activity outside Australia. Panic about securing supply is a possibility, ”said a contact. “It looks like we are entering a period of considerable volatility in the global meat trade, driven by the smallest changes, especially in commodities, and Argentina’s decision only adds to that.” , did he declare.
Will the suspension end after 30 days?
There is also widespread speculation around the trade that although Argentina has suggested that its export suspension only last for 30 days, history has shown that previous examples of the country’s attempts to control domestic prices by banning exports last much longer – in one example, over a year. The impact of this event was weak exports from Argentina for years after its herd declined.
“What was supposed to come out of Argentina to China for the next month is wrong,” an Australian exporter told Beef Central. “These would be book orders that Chinese customers will no longer receive, so other arrangements have to be made.”
So where is China looking to fill the void?
The obvious target is Brazil, a trader said, but Brazil has its own production issues this year, being well below volumes produced last year, after liquidating much of its cow herd to meet demand. the demand for Chinese beef. As a result, Brazilian beef export prices this year were considerably higher than those seen for at least two years (see yesterday’s report).
In terms of other sourcing options, Australia is still heavily constrained by low production volume after two years of drought (although the eastern states last week’s kill at 107,000 head was the highest for year so far, but still down around 30% that same week two). years ago.
One exporter said the main items coming out of Australia to China right now are at opposite ends of the quality spectrum.
“These are either very inexpensive bone items, shins, flats, and mandrel rolls; or very expensive items, including Angus and Wagyu branded programs for high-end dining. There aren’t many middleman items like eye lathes, oyster blade mandrel rolls coming out of Australia anymore because other markets pay more and we don’t have that many approved factories. by China, ”he said.
The next targets that Chinese customers were likely to be looking for were New Zealand or the United States.
“In New Zealand’s case, it is nearing the end of its seasonal production cycle for commodity-type beef (dairy beef and bull) within the next three or four weeks,” said the export source.
“And because the United States, as a supplier, is essentially Angus of grain, it can play a role in the high end of the quality range, but that does not fill the huge void left by Argentina for cheaper staple meat.
“This is despite the fact that the United States recently obtained 31 more meat processing plants (beef, pork and chicken) approved for export to China, in addition to 19 more the previous month. During the same period, Australia has not obtained any new factory approvals for export to China. “
“The world is a different place than it was a year or two ago, and products like beef and sheep are in great demand around the world. China will not find it easy to fill the void left by Argentina’s exit, even if it only lasts a month. “
Some business sources suspected that Argentinian meat companies would simply cut beef production during the month-long export ban to avoid forcing meat prices down significantly, but others felt that on Based on past experience, there was no guarantee that the suspension would be lifted by the Argentine government after 30 days.
Another source told Beef Central this morning that the Argentinian government’s export suspension may not have been solely politically motivated in the run-up to the next election, artificially lowering meat prices for local people. domestic consumers.
“This appears to be in part linked to a government crackdown on Argentinian meat companies, which use offshore trading accounts to avoid paying government taxes on meat sales. The suspension also involves sending these meat companies a warning that they have to pay their dues, ”he said.
SIAL trade fair in effervescence
The SIAL food show that continues in Shanghai this morning has been a “ buzz ” of speculation about the market reaction, Beef Central was told.
An interesting observation from last night’s show was the contrast between the social events of Australian and American exporters held at the same time. Australia managed to gather around 150 Chinese business contacts for its event, which in recent years had hosted “500-700,” Beef Central was told.
On the other hand, the equivalent American function welcomed around 1,500 people last night.